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Seminario CEDE

Thursday 24 October 2019, 12:30 - 13:45
by Hits : 1995


Coautores: Kevin Donovan (Yale) y Terence Johnson (Notre Dame)

"An increasingly utilized class of general equilibrium models includes inter-firm knowledge spillovers through diffusion. Standard methods to calibrate critical diffusion parameters require making assumptions about the economic environment, then using the resulting structure to map these parameters onto more easily observed empirical moments. Within this class of models, we prove that randomly varying interactions uniquely identifies a small set of parameters characterizing the diffusion process independent of the remaining economic environment. We provide an application of our results in Kenya, where we conduct a randomized controlled trial matching firms from the left tail of the profit distribution to those from the right. Despite matching the quick fade out of the small-scale experimental treatment effect, the model simultaneously implies a large general equilibrium diffusion externality. Key is that critical parameters push the partial and general equilibrium magnitudes in different directions. This matters: if a policy-maker selected economies in which to implement optimal policy based solely on the magnitude of their experimental impact, she would in fact minimize the possible welfare gains. Thus, the ability to properly estimate such parameters is critical not only for measuring the equilibrium importance of diffusion but alsofor the interpretation and extrapolation of smaller-scale empirical studies."

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